Topic 1: FEBRUARY 2024: JITTERY POSITIVE VIBES

In February 2024, the month commenced with the unveiling of Interim Budget 2024, laying the groundwork for targeted growth initiatives amidst economic challenges. The market response to the Budget was mixed. Focused on infrastructure development and fiscal prudence, the Budget echoed the government's commitment to fostering a stronger economy. During the second week, the MPC meeting maintained unchanged rates, in line with market expectations. However, mid-month witnessed a setback as the Sensex dropped approximately 500 points due to elevated US inflation, sparking a sell-off in Asian markets. By month-end, Indian equity markets rebounded, reaching all-time highs.

The benchmark equity indices, BSE Sensex and BSE MidCap, advanced over 1%, while the BSE SmallCap index experienced a 1.09% retreat. Notably, at least 13 stocks listed on BSE more than doubled investors' wealth. Following the disclosure of the country's Q3FY23 GDP growth of 8.4% on February 29, the markets exhibited a sharp rise. On March 1, the Sensex surged over 1,000 points in the afternoon trade, with the Nifty index up over 300 points. Both indices achieved new all-time highs, propelled by buying activity fuelled by various domestic and global macroeconomic factors. BSE Sensex reached a new record high of 73,819.21, ultimately rallying 1,245.05 points (1.72%) to settle at 1245.05. NSE's Nifty50 surpassed the 22,350-mark for the first time, settling at 22,338.75, reflecting a surge of 355.95 points (1.62%) for the day.
While the BSE midcap index added less than a percent, the smallcap index rose two-thirds of a percent. The fear gauge in India eased more than 2%, concluding the week at 15.24 levels. Nifty IT, media, healthcare, and pharma stocks lagged, but a rally was steered by buying in financials, banks, metals, and auto sectors. As the month concluded, the markets exhibited positive momentum driven by various factors, including:

India's GDP Numbers:
The Indian economy surged, registering a growth rate of 8.4% in the December 2023 quarter, surpassing initial estimates. This robust expansion was fuelled by a dynamic manufacturing and construction sector, marking the fastest economic growth in six quarters. With a remarkable 11.6% annual growth in the manufacturing sector and a 9.5% increase in the construction sector in the third quarter, the FY24 estimate was revised upward to 7.6% from 7%. Despite a contraction of 0.8% in the agriculture sector due to adverse monsoon conditions and El-Nino impact, the overall economic journey positions India as a favoured destination for investors.

US Inflation Data: US inflation eased to 2.4% in January 2024, aligning with the US Federal Reserve's inflation target. The in-line readings of US inflation reinforced expectations for a potential rate cut in June. The positive economic climate was evident as US stocks settled higher, with the Nasdaq reaching a record high close after over two years. This rally was fuelled by investor optimism, buoyed by better-than-expected Core PCE numbers and the Fed's expected inflation gauge meeting consensus forecasts.

Globally, indices remained upbeat, sustaining hopes for central bank rate cuts in the upcoming months. Investors expressed confidence in both the US Federal Reserve and the European Central Bank for potentially lowering borrowing costs in June.

Positive FII Data:
Notwithstanding Foreign Portfolio Investors (FPIs) turning net sellers of domestic stocks on the last day of February, the overall month displayed positive trends. NSE data indicated FPIs selling domestic stocks worth Rs 3,568.11 crore, while domestic institutional investors (DIIs) divested Rs 230.21 crore in Indian equities in the previous session. Despite these sell-offs, overseas investors injected a total of Rs 1,539 crore into local equities throughout February. FPIs, reversing January's selling streak, became net buyers in February, showcasing resilience despite the backdrop of high US bond yields. Although the capital outflow from Indian equities by FPIs in 2024 reached ₹20,004 crore, the positive trend continued as FPIs infused ₹4,201 crore in Indian equities on March 1, despite offloading ₹134 crore from the debt market. FPIs were prominent sellers in the financials and FMCG sectors in February, but their outflow declined, culminating in them becoming net buyers by the end of the month.

Blue Chip Buying and High Auto Sales:
The markets witnessed an upswing fuelled by buying in index heavyweights. Notably, ICICI Bank, HDFC Bank, Reliance Industries, and Larsen & Toubro collectively contributed around 60% of the 1,245 points rally observed in the Sensex during the session. Key gainers included State Bank of India and Tata Steel. Indian automakers reported strong sales in February, with increased demand for two-wheelers and utility vehicles. Companies such as TVS Motors, Maruti Suzuki India, Tata Motors, Hero MotoCorp, and Bajaj Auto all experienced positive gains.

In summary, the positive trajectory at the close of the month was shaped by a confluence of favourable economic indicators, robust market activities, and investor confidence in both domestic and global contexts. Global developments, such as upcoming elections in India and the US, escalating crude prices, recovery in major economies, global and domestic macroeconomic data, geopolitical tensions, and foreign capital inflows, have significantly impacted the market dynamics.

In February, crude oil prices experienced a 2% increase in the previous session, reflecting weekly gains. Traders eagerly awaited the decision on supply agreements for the second quarter by the Organization of the Petroleum Exporting Countries and its allies (OPEC+). The market sentiment was also influenced by fresh economic data from the US, Europe, and China. Brent futures for May settled $1.64 higher, reaching $83.55 a barrel, while the April Brent futures contract expired at $83.62 a barrel on February 29. Meanwhile, US West Texas Intermediate (WTI) for April rose by $1.71 (2.19%), closing at $79.97 a barrel, as reported by Reuters. Analysts speculated that OPEC+ was expected to maintain voluntary production cuts well into the second quarter of 2024. Several key economic indicators are anticipated to impact the market in the near future. Notable among these are China's Caixin Services PMI, inflation figures, UK S&P Global/CIPS Services PMI and Construction PMI, US S&P Global Services PMI, API weekly crude oil stock, ADP nonfarm employment change, initial jobless claims, and the unemployment rate. While the overall market sentiment appears positive, the possibility of volatility cannot be overlooked, given the prominent role played by global concerns. The market will likely remain sensitive to developments in geopolitical landscapes, economic data releases, and any unforeseen events that may impact the stability of major economies and influence investor confidence.